offset account again

[scott]

I received my bank statement that said

"Mortage offset interest savings $1612.60"

So what exactly does this mean?
Since I still pay the same each month does this mean that $1612.60 has come off the principal?

Thanks
Scott

 

[Simon]

Yes that is correct. Your interest component will have decreased by this amount so if you are paying more it will come off the principal.

Cheers,

 

[scott]

thanks Simon

Scott

 

[kissfan]

I received my bank statement that said

"Mortage offset interest savings $1612.60"

So what exactly does this mean?
Since I still pay the same each month does this mean that $1612.60 has come off the principal?

Thanks
Scott

Does that mean that the $1612.60 (since it appears on a statement) has to be declared as interest come tax time?

Regards
Marty

 

[Simon]

No - it wasn't interest. It was just a message advising how much was saved. There is no record of this money being received by the borrower.

Cheers,

 

[Les]

G'day Scott,

I received my bank statement that said

"Mortage offset interest savings $1612.60"

So what exactly does this mean?
Since I still pay the same each month does this mean that $1612.60 has come off the principal?"

From where I sit, it sounds like they are advising you of the Interest you HAVEN'T HAD TO PAY on a mortgage because of funds in the Offset account. So, in a manner of speaking, you could say that it has "come off the principal" - temporarily.....

But, it could also be CUMULATIVE (i.e. this figure could have been saved over the last 6 months, say). If I'm anywhere near correct - no guarantees of this - then your principal has NOT reduced, BUT the Offset has minimised the mortgage payments "as though the mortgage WAS reduced".

In the end, you've saved Interest on a Mortgage because of funds in the Offset account - the mortgage has not changed at all (assuming IO here...).

Could I be wrong about this? Absolutely, but then I don't know your situation intimately. Have a search on "Offset accounts" and things should become a bit clearer.

Regards,

 

[Medine]

Hi Les,

Yes, you're right, $1612.60 is the amount of interest saved.

But as Scott is "paying the same amount each month", this saving will be taken off the principal, as Simon explained. If Scott was paying interest only his repayments would be reduced.

Is that clearer?

Cheers, Medine.

 

[scott]

Thanks Les and Medine,
Yes it is a P & I loan

Scot

 

[Les]

G'day Medine,

Is that clearer?

Yeah, and thanks - I don't have too many P&I loans, so I must admit I was tending to attack the question as though it were IO. Well done (you and Simon) for understanding this straight out - I certainly got a bit confused....

Regards,